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Macquarie Equities has upgraded its recommendation on listed trust
Charter Hall Office REIT
, in light of the potential impact of improving US office market conditions on the sale of the trust’s US assets.

Macquarie lifted its rating on the share from “underperform" to “neutral".

The trust originally planned to sell a half share of its US portfolio into a joint venture vehicle to be run by a Charter Hall Group entity.

However, it then engaged Bank of America Merrill Lynch to assess the level of interest in the portfolio. The expressions of interest campaign for the portfolio was expected to close last week.

The US portfolio was worth a total of $US1.675 billion in December 2010 and Macquarie is flagging the potential for assets to be sold at a premium to that value.

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“Given improving conditions in the US, there is a possibility that assets are sold above book value with more proceeds potentially available to be utilised for an accretive share buyback," according to the analysts.

“Whilst on a going-concern basis, the stock is not cheap given low cash flow, and whilst there is still a great deal of uncertainty in relation to these US asset sales and subsequent application of proceeds, our base-case asset sale scenarios suggest 3 to 9 per cent upside from the current share price."

The impact on the business would depend on how the capital was deployed, Macquarie said.

In the way of any sale are a number of hedge funds, which oppose the sale of a half share in the portfolio and have been building a stake in the trust.

The funds, Orange Capital, Luxor Capital and Point Lobos Capital, have vowed to work together and now own a combined 18.2 per cent of the trust.

National Australia Bank
and related entities appeared on the trust’s susbstantial shareholder register for the first time last week, with a 5.2 per cent holding in the trust.